Laying your hands on cash in Kenya’s remote areas could be a tall order, but Kenya, partnering with Red Cross and other international agencies have found a way to make this more possible. The partnership would now leverage a new global network of blockchain-backed community currencies to supplement direct cash and voucher assistance programs for Kenya ’s most vulnerable communities.
The two-year blockchain project will test, develop and distribute eVouchers, or Community Inclusion Currencies, held in mobile wallets on feature phones in some of the poorest areas in Kenya where national currency is scarce.
“We need new financial solutions such as blockchain-based community currencies that can support the long-term resilience of marginalised communities, said Dr Asha Mohammed, Secretary General Designate of the Kenya Red Cross Society.
“Regrettably, the bulk of direct aid flows out of communities too quickly to provide lasting impact. With the Community Inclusion Currencies, we give an opportunity to activate key community members and resources that normally remain largely underutilized and outside monetary economy. Community Inclusion Currencies are a globally replicable tool for communities to build resilience and fight poverty.”
Here Is All You Need To Know
- The initiative will be delivered by the Norwegian Red Cross, Danish Red Cross, and Kenya Red Cross, together with Innovation Norway, Grassroots Economics Foundation and Sempo, an Australia-based technology firm.
- This network will aim to improve the efficiency and effectiveness of the $1 billion a year distributed by the Red Cross in cash and voucher assistance programs by 2020.
- Funding for the new platform was secured after feasibility studies in Tigray, Ethiopia and Kinango, Kenya, showed eVouchers could help local markets to keep capital within designated communities and improve household income by up to 50 per cent.
- Other countries being considered for the initiative include Malawi, Zimbabwe, Cameroon, Papua New Guinea, and Myanmar.
- The project has received more than US$1 million in funding from Innovation Norway, Aon, Dutch Postcode Lottery fund Stichting DOEN, and Danish logistics company DSV after earlier pilots funded by DOEN showed the community currencies were up to 20 times more effective than direct aid in producing sustainable impacts.
Securing The Community Currencies Through Blockchain
- The community currencies will be securely held on a blockchain and available for users to exchange for basic needs within particular communities.
- They can also be used across networks of other connected communities with their own digital currencies, with every transaction transferred and updated on the blockchain.
- Community Inclusion Currencies will be exchangeable with rotating “seed” funds between multiple communities and supported by stakeholders, such as the Red Cross, microfinance institutions (MFIs), and social impact investors.
- In previous pilots, seed funds of roughly US$7,500 formed the collateral for US$30,000 of the community currencies, which circulated to generate local trade worth more than US$150,000.
“Norwegian Red Cross believes that technology can help us reach more people affected by crises, with the financial resources we have available today,” said Tørris Jæger, international director for the Norwegian Red Cross.
“To stay relevant, it is crucial that the humanitarian sector also invests in new and innovative approaches.”
- Whereas traditional cash transfers are limited by the precise amount of money budgeted for a specific humanitarian intervention, the community currencies benefit from a common financing practice referred to as fractional reserve, which holds back a fraction of deposits for lending or liabilities.
- At the same time, the community currencies can use blockchain transparency to continuously revalue the credits created, a process that monitors and applies leverage to the pool of seed funding.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world